A financial adviser has been publicly named and warned by the regulator due to advice he gave clients about KiwiSaver in the wake of the market drop caused by the outbreak of Covid-19.
The Financial Markets Authority said Roger David Gannon, an authorised financial adviser of Gannon Insurance Brokers in Palmerston North sent a bulk email in March last year recommending clients move their KiwiSaver and other investments funds to low risk funds.
The regulator found out about the email after a complaint from one of Gannon's clients and it issued a formal warning to Gannon in May without naming him.
But subsequent inquiries by the FMA uncovered further concerns about his advice process prompting the public naming,
James Greig, FMA director of supervision, said Gannon had contravened the Financial Advisers Act 2008 by failing to meet disclosure requirement and by failing to exercise care, diligence, and skill that a reasonable financial adviser would exercise in similar circumstances.
"The FMA believes that Mr Gannon tried to 'time the market' by advising clients to switch investment funds multiple times within a short period without adequately explaining the risks of doing so," the warning said.
"When providing this advice, Mr Gannon failed to have proper regard to each client's risk profile and personal circumstances."
Greig said Gannnon's advice was a "knee-jerk" reaction to market volatility at the time and failed to meet the standards expected for supporting his clients.
The FMA said in issuing the warning it took into account the fact that Gannon had engaged an independent consultant to assist with carrying out a professional development plan, compliance training and a review of past advice and supplementing it where appropriate, all of which serve to mitigate the risk of potential future harm.
The independent consultant will report to the FMA on progress with this programme.
The regulator said Gannon had cooperated fully with the FMA throughout its inquiries.
Gannon told the Herald he knew the public warning was coming.
"I have taken a lot of steps to ensure that I am compliant and that all recommendations and advice that I give is top-notch."
He said he did not have any worries about the public warning affecting his business and had not received any calls from clients about it.
Gannon said as soon as he got the warning last year he jumped on to it and made sure all the problems were fixed and compliant.
The biggest worry he had was that twice in the past five years he had been audited by a company to make sure his processes were compliant, and nothing had been picked up until the FMA investigation.
"I was a bit miffed by that."
He said that company was not around anymore and he was now dealing with another company that had been excellent in helping him through this process.
"It was a shock to go through this process, but I know now I am absolutely shipshape."
There were no civil penalties for the breaches of the law.